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Residential Mortgage Securities and MSR-Related Assets (Tables) | 6 Months Ended
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Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract] |
Schedule of information about MBS and CRT Securities | The following tables present certain information about the Company’s residential mortgage securities at June 30, 2020 and December 31, 2019: June 30, 2020
(In Thousands) |  | Principal/ Current Face |  | Purchase Premiums |  | Accretable Purchase Discounts |  | Discount Designated as Credit Reserve (1) |  | Gross Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Net Unrealized Gain/(Loss) |  | Fair Value
Non-Agency MBS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expected to Recover Par (2)(3) |  | $ | 59,512 |  |  | $ | — |  |  | $ | (8,430 | ) |  | $ | — |  |  | $ | 51,082 |  |  | $ | 6,962 |  |  | $ | (6,372 | ) |  | $ | 590 |  |  | $ | 51,672 |
Expected to Recover Less than Par (2) |  | 2,849 |  |  | — |  |  | — |  |  | (669 | ) |  | 2,180 |  |  | 385 |  |  | — |  |  | 385 |  |  | 2,565 |
Total Non-Agency MBS (4) |  | 62,361 |  |  | — |  |  | (8,430 | ) |  | (669 | ) |  | 53,262 |  |  | 7,347 |  |  | (6,372 | ) |  | 975 |  |  | 54,237 |
CRT securities (5) |  | 104,309 |  |  | 2,052 |  |  | (129 | ) |  | (20,768 | ) |  | 85,464 |  |  | 11,945 |  |  | (3,303 | ) |  | 8,642 |  |  | 94,106 |
Total MBS and CRT securities |  | $ | 166,670 |  |  | $ | 2,052 |  |  | $ | (8,559 | ) |  | $ | (21,437 | ) |  | $ | 138,726 |  |  | $ | 19,292 |  |  | $ | (9,675 | ) |  | $ | 9,617 |  |  | $ | 148,343 |
December 31, 2019
(In Thousands) |  | Principal/ Current Face |  | Purchase Premiums |  | Accretable Purchase Discounts |  | Discount Designated as Credit Reserve (1) |  | Gross Amortized Cost (6) |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Net Unrealized Gain/(Loss) |  | Fair Value
Agency MBS: (7) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fannie Mae |  | $ | 1,119,708 |  |  | $ | 43,249 |  |  | $ | (22 | ) |  | $ | — |  |  | $ | 1,162,935 |  |  | $ | 9,799 |  |  | $ | (14,741 | ) |  | $ | (4,942 | ) |  | $ | 1,157,993 |
Freddie Mac |  | 480,879 |  |  | 19,468 |  |  | — |  |  | — |  |  | 500,961 |  |  | 5,475 |  |  | (3,968 | ) |  | 1,507 |  |  | 502,468 |
Ginnie Mae |  | 3,996 |  |  | 73 |  |  | — |  |  | — |  |  | 4,069 |  |  | 52 |  |  | — |  |  | 52 |  |  | 4,121 |
Total Agency MBS |  | 1,604,583 |  |  | 62,790 |  |  | (22 | ) |  | — |  |  | 1,667,965 |  |  | 15,326 |  |  | (18,709 | ) |  | (3,383 | ) |  | 1,664,582 |
Non-Agency MBS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expected to Recover Par (2)(3) |  | 722,477 |  |  | — |  |  | (16,661 | ) |  | — |  |  | 705,816 |  |  | 19,861 |  |  | (9 | ) |  | 19,852 |  |  | 725,668 |
Expected to Recover Less than Par (2) |  | 1,472,826 |  |  | — |  |  | (73,956 | ) |  | (436,598 | ) |  | 962,272 |  |  | 375,598 |  |  | (9 | ) |  | 375,589 |  |  | 1,337,861 |
Total Non-Agency MBS (4) |  | 2,195,303 |  |  | — |  |  | (90,617 | ) |  | (436,598 | ) |  | 1,668,088 |  |  | 395,459 |  |  | (18 | ) |  | 395,441 |  |  | 2,063,529 |
Total MBS |  | 3,799,886 |  |  | 62,790 |  |  | (90,639 | ) |  | (436,598 | ) |  | 3,336,053 |  |  | 410,785 |  |  | (18,727 | ) |  | 392,058 |  |  | 3,728,111 |
CRT securities (5) |  | 244,932 |  |  | 4,318 |  |  | (55 | ) |  | — |  |  | 249,195 |  |  | 6,304 |  |  | (91 | ) |  | 6,213 |  |  | 255,408 |
Total MBS and CRT securities |  | $ | 4,044,818 |  |  | $ | 67,108 |  |  | $ | (90,694 | ) |  | $ | (436,598 | ) |  | $ | 3,585,248 |  |  | $ | 417,089 |  |  | $ | (18,818 | ) |  | $ | 398,271 |  |  | $ | 3,983,519 |
(1) | Discount designated as Credit Reserve is generally not expected to be accreted into interest income.
(2) | Based on management’s current estimates of future principal cash flows expected to be received.
(3) | Includes RPL/NPL MBS, which at June 30, 2020 had an $59.4 million Principal/Current face, $51.0 million amortized cost and $51.5 million fair value. At December 31, 2019, RPL/NPL MBS had a $632.3 million Principal/Current face, $631.8 million amortized cost and $635.0 million fair value.
(4) | At June 30, 2020 and December 31, 2019, the Company expected to recover approximately 99% and 80% of the then-current face amount of Non-Agency MBS, respectively.
(5) | Amounts disclosed at June 30, 2020 includes CRT securities with a fair value of $63.4 million for which the fair value option has been elected. Such securities had $495,000 gross unrealized gains and gross unrealized losses of approximately $3.3 million at June 30, 2020. Amounts disclosed at December 31, 2019 includes CRT securities with a fair value of $255.4 million for which the fair value option has been elected. Such securities had gross unrealized gains of approximately $6.3 million and gross unrealized losses of approximately $91,000 at December 31, 2019.
(6) | Includes principal payments receivable of $614,000 at December 31, 2019, which is not included in the Principal/Current Face.
(7)
Schedule of Sale of Residential Mortgage Securities | The following table presents information about the Company’s sales of its residential mortgage securities for the three and six months ended June 30, 2020 and 2019. The Company has no continuing involvement with any of the sold securities.
|  | Three Months Ended June 30, 2020 |  | Three Months Ended June 30, 2019
(In Thousands) |  | Sales Proceeds |  | Gains/(Losses) |  | Sales Proceeds |  | Gains/(Losses)
Agency MBS |  | $ | 535,742 |  |  | $ | 3,563 |  |  | $ | 103,345 |  |  | $ | (2,272 | )
Non-Agency MBS |  | 1,054,980 |  |  | 151,095 |  |  | 70,818 |  |  | 8,823 |
CRT Securities |  | 207,379 |  |  | (24,992 | ) |  | 21,170 |  |  | 1,159 |
Total |  | $ | 1,798,101 |  |  | $ | 129,666 |  |  | $ | 195,333 |  |  | $ | 7,710 |
|  | Six Months Ended June 30, 2020 |  | Six Months Ended June 30, 2019
(In Thousands) |  | Sales Proceeds |  | Gains/(Losses) |  | Sales Proceeds |  | Gains/(Losses)
Agency MBS |  | $ | 1,500,875 |  |  | $ | (19,291 | ) |  | $ | 103,345 |  |  | $ | (2,272 | )
Non-Agency MBS |  | 1,318,842 |  |  | 107,951 |  |  | 196,912 |  |  | 26,976 |
CRT Securities |  | 243,025 |  |  | (27,011 | ) |  | 104,539 |  |  | 7,615 |
Total |  | $ | 3,062,742 |  |  | $ | 61,649 |  |  | $ | 404,796 |  |  | $ | 32,319 |
Schedule of information about MBS and CRT Securities that were in an unrealized loss position | The following table presents information about the Company’s residential mortgage securities that were in an unrealized loss position at June 30, 2020, with respect to which no allowance for credit losses has been recorded: Unrealized Loss Position For:
|  | Less than 12 Months |  | 12 Months or more |  | Total
| Fair Value |  | Unrealized Losses |  | Number of Securities | Fair Value |  | Unrealized Losses |  | Number of Securities | Fair Value |  | Unrealized Losses
(Dollars in Thousands)
Non-Agency MBS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expected to Recover Par (1) |  | $ | 43,422 |  |  | $ | 6,372 |  |  | 5 |  |  | $ | — |  |  | $ | — |  |  | — |  |  | $ | 43,422 |  |  | $ | 6,372 |
Total Non-Agency MBS |  | 43,422 |  |  | 6,372 |  |  | 5 |  |  | — |  |  | — |  |  | — |  |  | 43,422 |  |  | 6,372 |
Total MBS |  | 43,422 |  |  | 6,372 |  |  | 5 |  |  | — |  |  | — |  |  | — |  |  | 43,422 |  |  | 6,372 |
CRT securities (2) |  | 59,477 |  |  | 3,303 |  |  | 8 |  |  | — |  |  | — |  |  | — |  |  | 59,477 |  |  | 3,303 |
Total MBS and CRT securities |  | $ | 102,899 |  |  | $ | 9,675 |  |  | 13 |  |  | $ | — |  |  | $ | — |  |  | — |  |  | $ | 102,899 |  |  | $ | 9,675 |
(1) | Based on management’s current estimates of future principal cash flows expected to be received.
(2) | Amounts disclosed at June 30, 2020 include CRT securities with a fair value of $59.5 million for which the fair value option has been elected. Such securities had unrealized losses of $3.3 million at June 30, 2020.
Schedule of Credit Losses | The following table presents a roll-forward of the allowance for credit losses on the Company’s Residential mortgage securities and MSR-related assets:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(Dollars In Thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Allowance for credit losses at beginning of period |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Current provision: |  | — |  |  | — |  |  | — |  |  | — |
Securities with no prior loss allowance |  | — |  |  | — |  |  | 344,269 |  |  | — |
Securities with a prior loss allowance |  | — |  |  | — |  |  | — |  |  | — |
Write-offs, including allowance related to securities the Company intends to sell |  | — |  |  | — |  |  | (344,269 | ) |  | — |
Allowance for credit losses at end of period |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Schedule of changes in the components of the purchase discount on Non-Agency MBS | The following table presents the changes in the components of the Company’s purchase discount on its Non-Agency MBS between purchase discount designated as Credit Reserve and accretable purchase discount for the three and six months ended June 30, 2020 and 2019:
|  | Three Months Ended June 30, 2020 |  | Three Months Ended June 30, 2019
(In Thousands) |  | Discount Designated as Credit Reserve |  | Accretable Discount (1) | Discount Designated as Credit Reserve |  | Accretable Discount (1)
Balance at beginning of period |  | $ | (389,472 | ) |  | $ | (90,968 | ) |  | $ | (501,619 | ) |  | $ | (130,147 | )
Impact of RMBS Issuer Settlement (2) |  | — |  |  | — |  |  | — |  |  | (833 | )
Accretion of discount |  | — |  |  | 932 |  |  | — |  |  | 14,551 |
Realized credit losses |  | 1,409 |  |  | — |  |  | 9,917 |  |  | — |
Purchases |  | — |  |  | — |  |  | (624 | ) |  | 409 |
Sales/Redemptions |  | 387,394 |  |  | 81,606 |  |  | 8,171 |  |  | 2,856 |
Transfers/release of credit reserve |  | — |  |  | — |  |  | 4,589 |  |  | (4,589 | )
Balance at end of period |  | $ | (669 | ) |  | $ | (8,430 | ) |  | $ | (479,566 | ) |  | $ | (117,753 | )
|  | Six Months Ended June 30, 2020 |  | Six Months Ended June 30, 2019
(In Thousands) |  | Discount Designated as Credit Reserve |  | Accretable Discount (1) | Discount Designated as Credit Reserve |  | Accretable Discount (1)
Balance at beginning of period |  | $ | (436,598 | ) |  | $ | (90,617 | ) |  | $ | (516,116 | ) |  | $ | (155,025 | )
Impact of RMBS Issuer Settlement (2) |  | — |  |  | — |  |  | — |  |  | (1,688 | )
Accretion of discount |  | — |  |  | 10,820 |  |  | — |  |  | 27,858 |
Realized credit losses |  | 5,868 |  |  | — |  |  | 17,420 |  |  | — |
Purchases |  | — |  |  | — |  |  | (624 | ) |  | 291 |
Sales/Redemptions |  | 436,885 |  |  | 76,056 |  |  | 11,363 |  |  | 19,202 |
Net impairment losses recognized in earnings |  | (11,513 | ) |  | — |  |  | — |  |  | — |
Transfers/release of credit reserve |  | 4,689 |  |  | (4,689 | ) |  | 8,391 |  |  | (8,391 | )
Balance at end of period |  | $ | (669 | ) |  | $ | (8,430 | ) |  | $ | (479,566 | ) |  | $ | (117,753 | )
(1) | Together with coupon interest, accretable purchase discount is recognized as interest income over the life of the security.
(2) | Includes the impact of $833,000 and $1.7 million of cash proceeds (a one-time payment) received by the Company during the three and six months ended June 30, 2019, respectively, in connection with the settlement of litigation related to certain residential mortgage backed securitization trusts that were sponsored by JP Morgan Chase & Co. and affiliated entities.
Schedule of impact of AFS on AOCI | The following table presents the impact of the Company’s AFS securities on its AOCI for the three and six months ended June 30, 2020 and 2019:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands) | 2020 |  | 2019 |  | 2020 |  | 2019
AOCI from AFS securities: |  |  |  |  |  |  |  |  |  |  |  |
Unrealized gain on AFS securities at beginning of period |  | $ | 148,910 |  |  | $ | 422,261 |  |  | $ | 392,722 |  |  | $ | 417,167 |
Unrealized (loss)/gain on Agency MBS, net |  | (394 | ) |  | 13,555 |  |  | (161 | ) |  | 21,880 |
Unrealized gain on Non-Agency MBS, net |  | 8,644 |  |  | 7,598 |  |  | 354,317 |  |  | 19,060 |
Unrealized gain on MSR term notes, net |  | 40,465 |  |  | 2,855 |  |  | 39,347 |  |  | 3,367 |
Reclassification adjustment for MBS sales included in net income |  | (144,736 | ) |  | (6,371 | ) |  | (389,067 | ) |  | (21,576 | )
Reclassification adjustment for impairment included in net income |  | — |  |  | — |  |  | (344,269 | ) |  | — |
Change in AOCI from AFS securities |  | (96,021 | ) |  | 17,637 |  |  | (339,833 | ) |  | 22,731 |
Balance at end of period |  | $ | 52,889 |  |  | $ | 439,898 |  |  | $ | 52,889 |  |  | $ | 439,898 |
Schedule of interest income on MBS, CRT Securities and MSR Related Assets | The following table presents the components of interest income on the Company’s residential mortgage securities and MSR- related assets for the three and six months ended June 30, 2020 and 2019:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Agency MBS |  |  |  |  |  |  |  |
Coupon interest |  | $ | 402 |  |  | $ | 22,938 |  |  | $ | 14,038 |  |  | $ | 47,566 |
Effective yield adjustment (1) |  | (412 | ) |  | (7,664 | ) |  | (5,186 | ) |  | (13,851 | )
Interest income |  | $ | (10 | ) |  | $ | 15,274 |  |  | $ | 8,852 |  |  | $ | 33,715 |
Legacy Non-Agency MBS |  |  |  |  |  |  |  |
Coupon interest |  | $ | 897 |  |  | $ | 22,861 |  |  | $ | 18,179 |  |  | $ | 47,133 |
Effective yield adjustment (2) |  | 1,153 |  |  | 14,523 |  |  | 10,560 |  |  | 27,667 |
Interest income |  | $ | 2,050 |  |  | $ | 37,384 |  |  | $ | 28,739 |  |  | $ | 74,800 |
RPL/NPL MBS |  |  |  |  |  |  |  |
Coupon interest |  | $ | 1,228 |  |  | $ | 14,635 |  |  | $ | 6,811 |  |  | $ | 31,078 |
Effective yield adjustment (1)(3) |  | 77 |  |  | 8 |  |  | 355 |  |  | 150 |
Interest income |  | $ | 1,305 |  |  | $ | 14,643 |  |  | $ | 7,166 |  |  | $ | 31,228 |
CRT securities |  |  |  |  |  |  |  |
Coupon interest |  | $ | 1,622 |  |  | $ | 5,477 |  |  | $ | 5,107 |  |  | $ | 11,595 |
Effective yield adjustment (2) |  | 8 |  |  | (383 | ) |  | (515 | ) |  | (301 | )
Interest income |  | $ | 1,630 |  |  | $ | 5,094 |  |  | $ | 4,592 |  |  | $ | 11,294 |
MSR-related assets |  |  |  |  |  |  |  |
Coupon interest |  | $ | 6,133 |  |  | $ | 12,338 |  |  | $ | 20,340 |  |  | $ | 22,957 |
Effective yield adjustment (1)(2) |  | 3,608 |  |  | — |  |  | 3,608 |  |  | 1 |
Interest income |  | $ | 9,741 |  |  | $ | 12,338 |  |  | $ | 23,948 |  |  | $ | 22,958 |
(1) Includes amortization of premium paid net of accretion of purchase discount. For Agency MBS, RPL/NPL MBS and the corporate loan secured by MSRs, interest income is recorded at an effective yield, which reflects net premium amortization/accretion based on actual prepayment activity. (2) The effective yield adjustment is the difference between the net income calculated using the net yield less the current coupon yield. The net yield may be based on management’s estimates of the amount and timing of future cash flows or on the instrument’s contractual cash flows, depending on the relevant accounting standard. (3) Includes accretion income recognized due to the impact of redemptions of certain securities that had been previously purchased at a discount of approximately $277,000 and $148,000 during the six months ended June 30, 2020 and 2019, respectively.

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